Credit Suisse plans to lean more heavily on its private banking franchise, targeting a bigger share of lucrative ultra-rich clients as tougher regulation and volatile markets dent investment banking returns.
"We haven't systemically taken advantage of all the opportunities that we see with our clients globally," Robert Shafir, co-head of Credit Suisse's private bank, told Reuters in his first interview since taking over the unit a year ago.
The Zurich-based bank aims to harness its large balance sheet to lend more to wealthy individuals and increase its share of ultra-rich clients, typically with asset of more than $50 million, to roughly half of its overall assets under management, from 44 percent currently.
"We have a pretty ambitious set of plans in terms of expanding our wallet share on the liability side of the balance sheet with our clients," Shafir said.
To keep pace with the increasing number of millionaires, Shafir and his co-head Hans-Ulrich Meister are aiming for the private bank to account for half of the group's risk-weighted assets (RWAs), against around a third currently.
"You read and hear a lot of noise about our industry and its transformation, but what you don't hear so much about is the major growth potential it has," Meister told Reuters in a separate interview.
Many private banks have spurned lending to the wealthy, despite the potentially lucrative returns, in favour of focusing on winning new assets to manage.
"They simply did not understand the true and complete interests of global high-net worth individuals," says Sebastian Dovey, managing partner of London-based wealth consultancy Scorpio Partnership.
"For some high net-worth clients, it made them feel as if the bank did not consider them credit-worthy - these are the wealthiest people that the bank could wish to serve and their desire for lending is often just to make efficient use of their capital," Dovey said.
Rivals such as UBS, Julius Baer and big US brokerages are pursuing a similar strategy after finding that simply lending can be the starting point of a client relationship.
Encouraging rich clients to take on debt is also a way of kick-starting revenue, which has suffered under historic low interest rates and a prolonged lull in client activity.
Yet Credit Suisse's private banking customers are a risk adverse lot, currently holding an average of 28 percent of their assets in cash or cash-like products, earning almost no income for the bank.
While investment banking suffers from volatile post-crisis markets and curbs on risk-taking, the market for private banking is growing, with households having more than $100 million expected to account for $11.6 trillion of global private wealth by 2017, up from $7.5 trillion last year, according to Boston Consulting Group.
Credit Suisse's private bank is the fifth-largest by assets after cross-town rival UBS and Bank of America Corp, Wells Fargo and Morgan Stanley.
Credit Suisse's private bank has been a steadier performer than its investment bank, serving as a cushion to more volatile trading income. In the first nine months of this year, its wealth and asset management unit recorded 2.8 billion Swiss francs ($3.1 billion) in pretax profit, compared with the investment bank's 2.2 billion francs.
Like UBS, Credit Suisse is also putting its investment bank at the disposal of wealthy clients.
"One of the real advantages as a private bank is the fact that we have one of the top investment banking franchises," says Shafir. "Towards the ultra-high net-worth space, the line between what these clients need is very blurry from what an institutional one does.
"If we can build that bridge effectively to service that clientele on the investment banking side is a huge opportunity for us," Shafir said. "We've just scratched the surface."
The pair are seeking synergies between the investment bank and the private bank as they seek to chop 950 million francs of spending from the wealth and asset management arm by 2015.